COULD HSBC Holdings be Hong Kong's first $100 stock? Next year's earnings growth for HSBC is increasingly encouraging, and analysts who predict a short term share price of $85 say it is not unrealistic to expect $100 per share next year. The recent surge in the share price has been fuelled by HSBC's subsidiary Midland Bank reporting interim earnings growth of GBP385 million (about HK$4.34 billion) at the pre-tax level and net profit of GBP282 million. The result caused excitement in Hong Kong and London, and HSBC's share price jumped a record $4 in one day. Previously, Hong Kong companies have instituted share splits when the price has risen to dizzy heights because of the perception that cheaper shares were more attractive to local investors. But if HSBC Holdings touches $100 per share, few analysts see a share split on the cards. Banking analyst at Crosby Securities Roger Edgley believed the bank sees its US and UK shareholders as more important than those in Hong Kong. He said: ''The bank's institutional shareholder base is the predominant consideration. Penny stocks are frownedupon by US fund managers in particular.'' The only argument for a split would be to increase the liquidity in the bank's shares. According to Mr Edgley, the bank will aim to keep its share price in the region of between US$15 and $50. He explained: ''It is all purely psychological. If Hong Kong shareholders feel a HK$100 stock is expensive they are mistaken. The number may look big, but it is only expensive or cheap in relation to its earnings. It is a good question, just what the bank will do, but I think a split is unlikely.'' Regional research director for Schroders Securities (Hong Kong) Nick Peacock said the time frame in which the increase could happen was still unclear, but it was on the cards. He said earnings per share for this year should be $8.18, rising to $9.80 for 1994. He said: ''HSBC is enjoying very good earnings growth this year, and 1994 should be even better.'' Those prospective earnings, given the current share price, would throw up a price/earnings (P/E) ratio of slightly more than eight times 1994 earnings, and at a share price of $100 dollars, a P/E ratio slightly more than 10. Mr Peacock said the diversity of the bank's operations added to the stock's appeal. He explained: ''The developing theme of the market is the de-rating of narrowly focused stocks. Those stocks, for example, which have exposure to China property and the like, look fine when the Chinese economy is alright but, because of their narrow focus, they look shaky when things are bad.'' Economic growth in the United States looks set to fall below expectations and, as a result, interest rates there and in Hong Kong will stay low. Mr Peacock expected any pick up in the rates to be delayed until early 1994 and, he said, this would mean the bank's spread, the difference between the interest rates set by the government and those set by the bank, would not be under such pressure. HSBC's operation in the US, Marine Midland, also has poor growth in customer deposits and its recent growth in earnings has come from a widening spread and a cut in operating costs. But Mr Peacock said for Marine Midland's results to continue to improve it must develop quality assets. The situation at Marine Midland contrasts with the results for Midland Bank, which Peacock described as very good. Mr Peacock said the increase in advances and the wider spread show a real improvement in operating performance. Midland Bank is increasingly looking like a very good buy for HSBC. There is a sign of real recovery in the British economy and good improvement in net interest income. And, again, if the provisions have been too conservative the situation can only look brighter for both Midland and its parent.